The facts of this case are simple.
The Quebec securities regulator, the Autorité des marchés financiers (AMF), alleged that between March 2021 and January 2022, Ramy Kamaneh and Mohamed Kada Mesli :
- participated in a market manipulation / pump and dump scheme
- targeting the securities of the companies Majic Wheels, ICOA and All American Pet Company – all penny stocks listed on the American over-the-counter market OTC Markets Group (the Manipulated Companies)
- realizing illicit profits of USD 12 million.
The AMF successfully applied to the Administrative Financial Markets Tribunal (Tribunal) for urgent ex parte orders prohibiting Kamaneh and Mesli from trading any securities or derivatives, from disposing of any of their assets, from selling real estate and prohibiting numerous banks and brokerage firms from releasing any funds or assets of Kamaneh and Mesli.
Market manipulation under the Quebec Securities Act (QSA)
Market manipulation is prohibited under two distinct provisions of the QSA:
- Section 195.2 prohibits the influencing or attempt to influence the market price or the value of securities by means of any unfair, improper or fraudulent practice
- Section 199.2 prohibits a person from engaging in a practice or course of conduct if the person know or ought reasonably to know that the practice or course of conduct creates or contributes to the creation of a misleading appearance of trading activity in, or an artificial price for, a security
Key Findings of the Tribunal concerning the Circumstantial Evidence of the AMF
- Through an analysis of IP addresses, metadata and financial documents, undisclosed relationships between Kamaneh and Mesli, on the one hand, and senior officers (CEO, CFO, Treasurer) of the Manipulated Companies on the other hand were discovered.
- Intense promotional campaigns (via press releases, tweets, filings of promotional materials with the OTC Markets Group) were launched with regard to the Manipulated Companies, which led to a 10 to 50 fold increase in their value of their shares.
- Kamaneh purchased large percentages (between 9% and 40%) of the shares of the Manipulated Companies before and during these promotional campaigns when the share prices were relatively low or rising, and liquidated them when the price of those shares was significantly higher.
- The USD $12 million profits made over a 10 month period were characterized by the Tribunal as “mirobolants” – meaning stupendous or miraculous.
- Some of those profits were used by Kamaneh and Mesli to acquire real estate in Quebec worth several million dollars.
- Kamaneh and Mesli could be pursuing – with the substantial profits they have already made – similar activities with other companies.
In light of the AMF’s evidence, the Tribunal found that it was imperative to implement a set of measures aimed at protecting the integrity of financial markets and the investing public, as well as maintaining public confidence in these markets. Without its immediate intervention, it feared that the substantial sums acquired illicitly would be squandered by Kamaneh and Mesli.
The author would like to thank the contributions of Mikaela Mailly.